Grade A offices outperform other segments in Bangkok

The prime office segment recorded the highest occupancy rate of 80% in Q1.

Bangkok’s overall market occupancy rate experienced a modest downturn, declining by 0.7 pts QoQ to 77%. 

According to Knight Frank, in the breakdown by office grades, Grade A offices demonstrated resilience, boasting the highest occupancy rate at 80%, despite a YoY decline of 4.7% mainly due to supply-side pressure. 

Here’s more from Knight Frank:

Conversely, Grade B offices continued to underperform, with an occupancy rate of 75%. It has been noted that many offices previously classified as Grade A have been downgraded to Grade B, losing key tenants to newer buildings of the same or a higher grade. Grade C offices, however, were the only segment to see an increase in occupancy rates this quarter, rising by 0.3 pts QoQ to 78%, attributed to the lack of new supply pressure and a reduced sensitivity to tenant relocations.

On the demand side, the total occupied space in the Bangkok office market decreased by 5,500 sq m, remaining at 4.70 million sq m. This quarter marked the onset of negative net absorption for Grade B. However, throughout the last year, all grades have shown positive net absorption. Grade A saw the largest increase in total occupied space YoY at 70,500 sq m, primarily driven by large or well-established corporations seeking new, modern facilities in prime locations. 

Furthermore, nearly half of Grade A offices have achieved green certification, making them particularly appealing to companies required to occupy spaces that adhere to stringent environmental, social, and governance (ESG) criteria. Grade B offices followed with a YoY increase in total occupied space of 30,000 sq m, while Grade C saw a much smaller increase at 1,200 sq m YoY. This indicates a consistent expansion across all office grades, with a noticeable preference for the upper segments.

In Q1, the office sector in Bangkok reported an average rent of THB 814 per square meter per month, with a marginal decrease of 0.4% QoQ and 0.5% YoY. The breakdown by office grades indicates Grade A offices at THB 1,178, Grade B at THB 833, and Grade C at THB 510. 

Grades A and C experienced minor rental changes of approximately +/- 0.5% for both QoQ and YoY. However, Grade B saw a more significant decrease in rental rate by 0.8% QoQ and 0.9% YoY, aligning with its occupancy performance.